# I have a question...



## gantonio45 (Jan 30, 2016)

Hey everyone,

I am brand brand new to the puff.com forums, although I've been a long time viewer of the site. Now, I have been a cigar smoker for about ten years now, and have recently got into the hobby of pipe smoking. With this, I have been interested in purchasing some cigars and pipe tobacco online.

I have never purchased any tobacco online because I have heard stories of a lot of people getting large bills at the end of the year for unpaid tobacco taxes.

So, my question to y'all is this. If I were to purchase some pipe tobacco from say, smokingpipes.com, and they are located in PA, but I live in TX, how exactly do I go about making sure the sales tax and tobacco tax gets paid? I have no problem paying the taxes, but I just don't know how I would go about doing so.

If any of you have any advice as to how you order your tobacco and/or how you pay those taxes, please reply. There is a ton of tobacco out there that I'd love to try, but I do not want to get stuck with a bill for hundreds or thousands of dollars at the end of the year. I know a lot of people use smokingpipes.com, so how do you guys do it? Or, am I just being paranoid?

Thank you everyone for your help. This is an issue that has been bothering me, and really the only reason I haven't ordered online yet. Thanks again everyone, and I'll be on to post a lot more often.


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## Rondo (Sep 9, 2015)

Welcome to the forum. Im glad you registered. 
I'm not familiar with the topic and sure those who are will share.


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## the1and0nly (Jan 28, 2016)

With typical goods - out of state sales are tax exempt.. not sure if tobacco is any different?


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## ras_oscar (Aug 30, 2015)

I agree. However, if buying from overseas there may be duties due. The only time I pay sales tax on ANY internet purchases is if the online vender has a brick and mortar presence in my state. Walmart online? pay tax. Target, ditto. Amazon, nada. Besides, I believe state tobacco tax is paid at the wholesale level, so the state should have already levied any tax due when the wholesale transaction was completed. See link below.

Cigar Taxes by State | halfwheel


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## KL15 (Feb 20, 2016)

Typically, the only taxes that attach to tobacco are on cigarettes. As you may have heard or read, this is constantly under scrutiny and the question is always whether cigar and pipe tobacco should be added. As of now it is not so you shouldn't have any problem. I have purchased cigars online for about 10 years now and have never had any problems at all. Also, ras_oscar is right, if there is no brick and mortar presence in your state then there usually is no tax involved.


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## ras_oscar (Aug 30, 2015)

To be clear, we are talking about 2 levels of taxes. One , sales tax, shows up on the retail sale and is collected by the retailer. The other. tobacco tax, is paid on the wholesale transaction. ( I believe when the retailer receives the order from the wholesaler? If you operate a B&M, please check my facts here) Sales tax is only applied to sales where the retailer has a B&M presence in the " ship to" state. Tobacco tax is paid regardless and is included in the online price you see. 


I'd be interested in any published sources the OP can link where an end purchaser was responsible for unpaid tax in a domestic transaction.


I used to live in Massachusetts. MA charged sales tax and liquor tax on alcohol sales. New Hampshire charged neither. MA ran an ad series which showed a man wearing nose glasses and a slouch hat putting a case of beer in his station wagon. The tag line said "if your traveling across state lines for a load you're going to get caught and prosecuted." The words were technically correct but, when coupled with the imagery suggested a private citizen was prohibited from going to NH to purchase alcohol. The regulation referred to commercial establishments purchasing from NH wholesalers to avoid the alcohol tax. Technically correct but intentionally misleading.


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## Hudabear (Feb 1, 2016)

ras_oscar said:


> To be clear, we are talking about 2 levels of taxes. One , sales tax, shows up on the retail sale and is collected by the retailer. The other. tobacco tax, is paid on the wholesale transaction. ( I believe when the retailer receives the order from the wholesaler? If you operate a B&M, please check my facts here) Sales tax is only applied to sales where the retailer has a B&M presence in the " ship to" state. Tobacco tax is paid regardless and is included in the online price you see.
> 
> I'd be interested in any published sources the OP can link where an end purchaser was responsible for unpaid tax in a domestic transaction.
> 
> I used to live in Massachusetts. MA charged sales tax and liquor tax on alcohol sales. New Hampshire charged neither. MA ran an ad series which showed a man wearing nose glasses and a slouch hat putting a case of beer in his station wagon. The tag line said "if your traveling across state lines for a load you're going to get caught and prosecuted." The words were technically correct but, when coupled with the imagery suggested a private citizen was prohibited from going to NH to purchase alcohol. The regulation referred to commercial establishments purchasing from NH wholesalers to avoid the alcohol tax. Technically correct but intentionally misleading.


Tobacco tax isn't included in online sales, only when you buy from an in-state B&M. Online sales from out of state are the responsibility of the user/consumer to declare come tax time. That's why the drive to purchase online is greater than buying everything from your local B&M, because the government can't track online tobacco sales and is therefor skirted by means of consumers not paying taxes.


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## WinsorHumidors (Feb 16, 2016)

I do not pay taxes when I purchase the cigars I place in my humidors from my wholesaler.

I am not responsible for collecting other state's taxes but am responsible for collecting taxes from an individual if I ship to them and they live in the state of NC. For instance, I place a box of cigars in a new humidor at my wholesale price and ship it to Joe in Raleigh. Even though there is no retail markup on an $87.50 box of Oliva Serie V Figurados I still have to collect 7.5% on the $87.50.

People who purchase from out of state are responsible for declaring the taxes they should have paid when they purchased from vendor with no B&M presence in their own state.

FWIW ... two pennies.


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## Bird-Dog (Oct 16, 2009)

Hudabear said:


> Tobacco tax isn't included in online sales, only when you buy from an in-state B&M. Online sales from out of state are the responsibility of the user/consumer to declare come tax time. That's why the drive to purchase online is greater than buying everything from your local B&M, because the government can't track online tobacco sales and is therefor skirted by means of consumers not paying taxes.


I think you're wrong about that. If I'm not mistaken, vendors (or perhaps the distributor they buy from) are subject to tobacco taxes for the state they're located in (not the shipping destination). Most online cigar vendors are located in low/no cigar-tax states. So, in the case of those located in states with no tobacco tax on cigars you are correct by default... but not for the reasons you think.

Premium cigars are also subject to federal import tariff.

Cigar Taxes by State | halfwheel


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## Hudabear (Feb 1, 2016)

curmudgeonista said:


> I think you're wrong about that. If I'm not mistaken, vendors (or perhaps the distributor they buy from) are subject to tobacco taxes for the state they're located in (not the shipping destination). Most online cigar vendors are located in low/no cigar-tax states. So, in the case of those located in states with no tobacco tax on cigars you are correct by default... but not for the reasons you think.
> 
> Premium cigars are also subject to federal import tariff.
> 
> Cigar Taxes by State | halfwheel


I see what you mean, I was mistaken. But I also think that you have to declare tobacco being brought into your state from another, for tax purposes?


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## UBC03 (Nov 18, 2015)

Hudabear said:


> I see what you mean, I was mistaken. But I also think that you have to declare tobacco being brought into your state from another, for tax purposes?


Like I said before. .you can keep track of the money you spend on smokes. no way I want a record of what I spent,laying around the house for other people to see. I'd be paying taxes and rent on a new place

Sent from my SM-G900V using Tapatalk


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## Hudabear (Feb 1, 2016)

Haha I'd rather take my chances than keep a ledger as well.


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## NormH3 (Apr 20, 2015)

Tobacco Tax Maps :


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## ras_oscar (Aug 30, 2015)

WinsorHumidors said:


> I do not pay taxes when I purchase the cigars I place in my humidors from my wholesaler.
> 
> I am not responsible for collecting other state's taxes but am responsible for collecting taxes from an individual if I ship to them and they live in the state of NC. For instance, I place a box of cigars in a new humidor at my wholesale price and ship it to Joe in Raleigh. Even though there is no retail markup on an $87.50 box of Oliva Serie V Figurados I still have to collect 7.5% on the $87.50.
> 
> ...


 The fed has already said for an internet purchase across state lines with no B&M presence in the receiving state, there is no sales tax. Why wouldn't the tobacco tax be treated the same? The only time I have paid a tax/duty was when I brought alcohol in from the Caribbean when returning from a cruise. I believe this is a federal import duty, not a state tax.


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## Bird-Dog (Oct 16, 2009)

DYODD

As usual when we get into these discussions it seems there's much confusion over sales tax vs tobacco taxes, state jurisdiction vs federally mandated tax reporting, etc... and a lot of misinformation floating around about them.

I do not profess to know all the answers. But I know enough to recognize that a lot of people who think they do, do not.


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## Hudabear (Feb 1, 2016)

curmudgeonista said:


> DYODD
> 
> As usual when we get into these discussions it seems there's much confusion over sales tax vs tobacco taxes, state jurisdiction vs federally mandated tax reporting, etc... and a lot of misinformation floating around about them.
> 
> I do not profess to know all the answers. But I know enough to recognize that a lot of people who think they do, do not.


I realize I make the short list of those thinking they know but are woefully wrong, I just reported what I found in my own due diligence of searching the interweb.


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## Bird-Dog (Oct 16, 2009)

Hudabear said:


> I realize I make the short list of those thinking they know but are woefully wrong, I just reported what I found in my own due diligence of searching the interweb.


 @Hudabear

I wasn't pointing the finger at anyone in particular. I happens every time this subject comes up. And there are a number of inconsistencies, from multiple posters, on every thread including this one.


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## Hudabear (Feb 1, 2016)

I know you weren't, I'm just stating what I've noticed as far as what I've posted on this topic. I don't mind being mistaken, it's a learning process.


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## the1and0nly (Jan 28, 2016)

My question in regards to the tobacco tax side of things.. is there any documented proof of an individual consumer ever being audited for this? If not, I'm not losing any sleep over it.


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## Hudabear (Feb 1, 2016)

I've seen articles of it happening to cigarette buyers not cigars though.


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## ras_oscar (Aug 30, 2015)

Hudabear said:


> I've seen articles of it happening to cigarette buyers not cigars though.


Buyers purchasing for resale or end users?

If anyone actually operates a B&M and could clarify at what level tobacco taxes are collected, I would consider myself further educated.


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## Hudabear (Feb 1, 2016)

ras_oscar said:


> Buyers purchasing for resale or end users?
> 
> If anyone actually operates a B&M and could clarify at what level tobacco taxes are collected, I would consider myself further educated.


Here:
http://www.cbs5az.com/story/27920233/az-man-gets-4427-cigarette-tax-bill-for-online-purchases
http://www.bankrate.com/financing/taxes/4575-tax-bill-for-online-cigarettes/
http://www.post-gazette.com/busines...te-buyers-hit-with-taxes/stories/201105050337
http://articles.latimes.com/2005/jan/17/nation/na-smoke17


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## ras_oscar (Aug 30, 2015)

All of those articles are referencing purchase of cigarettes.


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## Hudabear (Feb 1, 2016)

That's what I said. I have only seen it happen to cigarettes not cigars


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## WinsorHumidors (Feb 16, 2016)

Maybe I should clarify the details of my statement of not paying an excise tax when I purchase from my wholesaler. 

Scenario 1:
I purchase cigars from a wholesaler in another state ... I have to pay the DOR a 12.8% excise tax

Scenario 2:
I purchase wholesale cigars from Santa Clara, which is in my state, since they have already paid the 12.8% to the state I do not have to pay it again.

As a side note, I was incredibly surprised to find out how narrow the margin is between wholesale and actual online retail prices. Especially when one has to add in a sales tax (same state purchase) and then shipping. For some cigars, the margin is non-existant at my level.

C. T. Blankenship


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## DavidTanner (Dec 10, 2015)

Tobacco tax: a Tobacco tax is paid by the FIRST person receiving the tobacco in a state and it is only paid once. 10 businesses can touch the same cigar and as long as it stays in that state only the first person touching it in that state is liable for the tobacco tax. This applies to businesses (manufacturers, distributors, wholesalers, retailers) Not to consumers. Consumers aren't liable for the tobacco tax.

Use Tax: a consumer would be liable for what's known as a "use tax" in most states. That is a tax levied on anyone that purchases something from out of state that hasn't been taxed in their state (if you buy it online and the site doesn't charge you sales tax you're technically supposed to pay a use tax to the DOR in your state). Typically this applies to something bought for personal use to be consumed by a person...not a business. 

Sales tax: A sales tax is a tax paid by a retail establishment for any sales they make to the public. (Off topic but...when you pay a sales tax at any store that is technically the companies responsibility. They just pass it on to the consumer)


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## DavidTanner (Dec 10, 2015)

Most states won't let you buy cigarettes wholesale unless you have a valid instate license since cigarette smuggling is such a big thing. I live in a very low tobacco tax state and I've seen people with NY plates buy a store out at retail price just so they could go back home and sell them. 

That's why most States have a tax stamp on cigarettes. If the ATF busts you they'll fine the #$%& out of you. 


...as far as the "use tax" goes technically you should pay it on any internet purchase but I really doubt the IRS or DOR is going to come kicking your door in. They mainly focus on businesses that aren't paying their tobacco tax or sales tax. 

Before long they're going to level the playing field and start making online businesses start charging state tobacco taxes and sales taxes on their tobacco sales. That'll definitely help the good and honest B&M owners that arent price gouging. (Some B&M owners deserve to go out of business for intentionally gouging their customers a few bucks a stick over msrp...but we'll save that discussion for another day)


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## gcbright (Dec 1, 2012)

WinsorHumidors said:


> Maybe I should clarify the details of my statement of not paying an excise tax when I purchase from my wholesaler.
> 
> Scenario 1:
> I purchase cigars from a wholesaler in another state ... I have to pay the DOR a 12.8% excise tax
> ...


I know a retailer in NC who often gets very upset that certain brands show up for sale on Internet lower than his wholesale cost on the exact same stick.


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## DavidTanner (Dec 10, 2015)

Like Winsor was saying I can buy a box of cigars wholesale for say $100 once I add the tobacco tax in in my state its a $105 (5% tobacco tax) box...in NC its a 113 dollar box (12.8% tobacco tax) that doesn't even include shipping. With shipping (depending on how much I order) that 113 dollar box is probably up to $120. 

Online they're selling the box retail for $130 because they don't have to pay the state tobacco tax.... Now imagine what its like in CA, CO, or NY!?

In a B&M that box will sell for $200 (the MSRP)...and that's if he eats the cost. 


As a consumer I'm glad I can buy that box retail for $130...or probably $90 on cbid

As a business owner I see why prices are so high in a good B&M. Maybe if they level the playing field it'll help cigar shops to take back off again. I can only imagine how many customers cigar shops lost to the internet. That's why most quality cigar shops don't sell anything but the high end stuff you can't find on cbid or CA. They're smart enough to know the Internet's kicking their ass on the altadis and general brands. (The parent companies of CI and JR)


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## gcbright (Dec 1, 2012)

DavidTanner said:


> Like Winsor was saying I can buy a box of cigars wholesale for say $100 once I add the tobacco tax in in my state its a $105 (5% tobacco tax) box...in NC its a 113 dollar box (12.8% tobacco tax) that doesn't even include shipping. With shipping (depending on how much I order) that 113 dollar box is probably up to $120.
> 
> Online they're selling the box retail for $130 because they don't have to pay the state tobacco tax.... Now imagine what its like in CA, CO, or NY!?
> 
> ...


During my lifetime (with the exception of the Cigar Boom ) I have found that cigar stores were slowing dying on their own without assistance from the internet.

I do find it very interesting how shops now stock around and avoid heavy stocking in the area's of sticks that are way too discounted on internet. I know of one retailer in my state that has a rule that if he sees sticks consistantly sold mail order cheaper than he can get them wholesale, those sticks are not stocked unless they are filling a local (non-internet buying) customers needs.


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## DavidTanner (Dec 10, 2015)

gcbright said:


> I know a retailer in NC who often gets very upset that certain brands show up for sale on Internet lower than his wholesale cost on the exact same stick.


....what's even worse is when they're the ones wholesaling to you and telling you the MSRP is $200...then they're selling it out the backdoor for $130 with free shipping and a 5er of cohiba reddots! It really makes you wonder if their wholesale customers are more important or their retail customers. Its almost like some of them want their B&M customers to fail

And the bad thing is if you're buying manufacturer direct the price is only $5 cheaper because they've got the big players buying hundreds of thousands to millions of their cigars at one time so theyre the ones that truly set the MSRP

You can normally buy cigars on cbid cheaper than wholesale price...how are they making a profit if they're continuously letting them go for 1/3rd of the "MSRP"?


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## DavidTanner (Dec 10, 2015)

Lol sorry. I kinda went off on a rant there and got off topic...but it does tie into how internet sites aren't taking out a single tax on cigars and that's one way they sell them so cheap. If they had to pay 40% for every order shipping to NY I guarantee they would be charging MSRP + shipping+ tobacco tax

Ultimately it would hurt the end user. That's the only reason I don't wish it on them. 

A good cigar shop owner is going to roll with the waves. He knows if he offers a nice lounge, a good personality, a smoker friendly environment, and he only stocks top shelf sticks you can't find deeply discounted he's going to keep business. Its just like a bar...I can drink at home cheaper but sometimes you want someone to talk to. 

A good cigar shop will be able to convince his patrons to buy their high end stuff with him and go buy his $20 a bundle yard gars online...there isn't a margin on those cigars anyway. 

You have guys like padron and fuente that are fighting in defense of the B&Ms by not letting their cigars go dirt cheap online. Luckily a few brands haven't sold out to the big players yet.


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## gcbright (Dec 1, 2012)

DavidTanner said:


> ....what's even worse is when they're the ones wholesaling to you and telling you the MSRP is $200...then they're selling it out the backdoor for $130 with free shipping and a 5er of cohiba reddots! It really makes you wonder if their wholesale customers are more important or their retail customers. Its almost like some of them want their B&M customers to fail
> 
> And the bad thing is if you're buying manufacturer direct the price is only $5 cheaper because they've got the big players buying hundreds of thousands to millions of their cigars at one time so theyre the ones that truly set the MSRP
> 
> You can normally buy cigars on cbid cheaper than wholesale price...how are they making a profit if they're continuously letting them go for 1/3rd of the "MSRP"?


I think the companies I have the greatest respect for protect the integrity of their brand. Be it cigars, purses, shoes, cars etc.

If you get a big department store flyer, you can often tell what manufacturers protect their brand. They are always the ones in tiny print that are part of the 'limited exclusions'.

Certain brands allow their product to be discounted only at certain times of the year (if you ever wonder about that hard to get vacuum cleaner being on sale at Lowes, Walmart and best buy at the same time that is probably why).

Also, there is a gaming aspect and mentality to getting a deal. I used to know two guys who had collectable shops in the same town. They would game the hell out of the collectors (One guy would have a large number of a valuable card and the other guy would only have like 1). So the store with one would mark it full Overstreet collectable pricing and put it prominently on display, the other store would mark their 75% of Overstreet and clean up on them.

They went back and forth like this for like fifteen years. When one gentleman passed away and his widow shut down the business. I asked the other guy how things were going. His answer kinda surprised me. With the other shop in town now gone, his sales instead of doubling were down 25%.


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## WinsorHumidors (Feb 16, 2016)

Here is another slant on the situation. I frequent a B&M who has been in business for 30 years. He owns his own fields ... blends his own tobacco and was in on the ground floor with Arturo Fuente when he tried to enter the US market. He is in a unique situation where he gets to deal directly with the manufacturer.

Most of "us" ... retailers ... are not that lucky. Oh, we can deal with the dealers directly, I contacted Ashton to feel the waters. But, my first order had to be $5,000 or above and I had to carry all of their brands. Umm ... I don't build that many humidors!

It is the same game that has been going on for centuries ... importers deal with wholesalers and wholesalers deal with retailers and retailers deal with consumers ... each and everyone want their piece of the pie ... including the governments. That puts a high overhead on stogies.

I can tell you this, if you visit Cigar Page and you have all day to watch for your stick to appear on the "Sizzlin' Deal" page or whatever (it's the one where you have 5 minutes to purchase an item). Those sticks are darn near wholesale, at my level. Which is one step below the importer, wholesaler folks). Honestly, some sticks, like AF Hemingway Short Story I simply could not help you with. However, with Man O' War Ruination, there is a $50.00/box difference. So, there is profit to be made; however, my retail license was obtained for one reason alone, eye candy to populate my humidors. However, I am more than happy to help whomever I can, but with two layers of shipping (to me, then to you), excise tax and state sales tax (is applicable) ... it doesn't take a genius to imagine the profits evaporate very, very quickly.


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## Hari Seldon (Aug 22, 2015)

DavidTanner said:


> Tobacco tax: a Tobacco tax is paid by the FIRST person receiving the tobacco in a state and it is only paid once. 10 businesses can touch the same cigar and as long as it stays in that state only the first person touching it in that state is liable for the tobacco tax. This applies to businesses (manufacturers, distributors, wholesalers, retailers) Not to consumers. Consumers aren't liable for the tobacco tax.


Not necessarily true it appears. This is an interesting topic, one of the previous threads on tobacco tax on internet purchases turned in (my fault probably) to more of a discussion on the sales and use tax aspect of it as that was something I am familiar with and generally know about how the laws work (I say generally as each state is slightly different, I specifically know about the laws in my state and a couple surrounding it due to my profession). I had never looked in to my states tobacco tax as I haven't worked with a client that sells tobacco and did not consider it for myself personally, but I did so to satisfy my curiosity. I didn't do anything more sophisticated than Googling the topic and reading the pages on my states department of taxation, and I feel they are written fairly clearly so anybody should be able to do the same if they wanted to give themselves peace of mind (or scare themselves in to thinking they might get a big tax bill).

My state has a specific per pack cigarette excise tax, and a general tax of 17% of wholesale price on other tobacco products ("OTP"). Process of elimination would say that would apply to cigars and pipe tobacco. The "Taxpayer" section states:

The tax on other tobacco products is paid by:
• distributors, meaning all manufacturers, wholesalers
or retailers who are licensed as other tobacco product
distributors.
• any person who receives other tobacco products in
this state on which the excise tax has not been paid.

Bullet #2 seems to say I need to be paying the excise tax on my internet cigar purchases, but at 17% of what amount? I am not getting the wholesale price on them nor do I know what it is, and it doesn't seem reasonable for me to pay 17% of my price. Plus, the section on filing and paying the tax does not mention consumers individually, just that importers must be filing monthly reports. If that encompasses those of us (like me) importing for personal use that seems pretty ridiculous. I don't think there has been a month in the last 10 or so I would not have had some purchase to have to file for. I am going to keep on smoking and cross my fingers that I am too small a fish to bother with.


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## DavidTanner (Dec 10, 2015)

Maybe they included "any person" in there as an all encompassing body of businesses that touch the product? 

That's the bad thing about tobacco law...every state is slightly different so it's almost impossible to give a clear picture across the board...honestly I wouldn't worry about it. If you don't have a tobacco license I really doubt you're even going to show up on their radar. 

Sites like cbid almost make the need for a tobacco license obsolete (you have to have a wholesale license for a wholesaler or manufacturer to sell to you) since you aren't technically buying them "wholesale" but you're getting them cheaper than wholesale usually. I'm sure countless businesses skirt the tobacco tax by buying from cbid. 

Only problem is when the man shows up and asks why you have a fully stocked humidor but you've been reporting "$0" in purchases for the past few months...you better have a good attorney.


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